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Gig economy
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A third of us now work in the “gig economy”

Think of the gig economy, and you probably think of web-based companies like Airbnb, Deliveroo or Uber.  But these are just the visible tip of a much larger gig economy iceberg that includes everything from full-time professional roles to extremely precarious short-term and low paid gigs found on sites like Fiverr or Fivesquid.  According to a new report from McKinsey Global Institute, our failure to understand the scale and nature of the gig economy has distorted government economic policy across the developed world:

“Working nine to five for a single employer bears little resemblance to the way a substantial share of the workforce makes a living today. Millions of people assemble various income streams and work independently, rather than in structured payroll jobs. This is hardly a new phenomenon, yet it has never been well measured in official statistics—and the resulting data gaps prevent a clear view of a large share of labor-market activity.”

The McKinsey survey found that 162 million people (20-30%) in the USA and Europe are working in the gig economy to some extent.  And while the majority of those working in the gig economy are satisfied with their position, a sizeable minority (around 30%) are working in the gig economy as a last resort – either eking out a living solely from gig work or supplementing low paid, part-time or zero-hours work elsewhere in the economy:

“Although the reluctants and the financially strapped together constitute a minority of independent earners, the magnitude of the problem is still striking.  Scaling up the results of our survey suggests that 50 million Americans and Europeans are independent out of necessity, and more than 20 million of them rely on independent work as their primary source of income.”

This is a particular concern among older workers who struggle to find new employment if they lose a job within a decade of retirement.  Whereas 31 percent of 25-54 year olds are employed in the gig economy, this rises to 39 percent among the over 55s.  And while this may reflect older workers choosing to trade on the skills they acquired during their working lives in order to enjoy a more flexible semi-retirement, it also reflects a high degree of discrimination against older workers who are often all but excluded from conventional forms of employment.  As Sarah O’Connor at the Financial Times notes:

“Advocates say this style of work allows more people to participate in the labour market, giving them the flexibility they want. Critics say employers are offloading risk on to “independent” workers who do not enjoy employee protections such as the minimum wage or sick pay…

“This underscores the fact that underemployment and low wages still bedevil economies like the US and UK, even though their official unemployment rates are low at 5 and 4.9 per cent, respectively.”

Although the UK government has opened a review into the gig economy, it is doubtful that much will come of it.  While the (in effect) full-time employees of some of the larger companies may be granted some additional employment rates, any large-scale changes are likely to force people out of gig work and back onto state benefits; with the twin unwanted effects of raising welfare spending and driving up the unemployment figures.

In practice, for better or worse the gig economy is here to stay.  And in the absence of a genuine economic recovery, that is not necessarily a good thing.

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